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Pursuant to the Commission's letter of 1 August 1997, the Commission received comments, on 1 and 11 August 1997, from the Consumers' Association of Canada, the Fédération nationale des associations de consommateurs du Québec and the National Anti-Poverty Organization (CAC/FNACQ/NAPO), AT&T Canada Long Distance Services Company, the Government of British Columbia, Rogers Cantel Inc. (Cantel), the Canadian Cable Television Association, Clearnet Communications Inc., Stentor Resource Centre Inc. (Stentor) on behalf of BC TEL, Bell Canada, The Island Telephone Company Limited, Maritime Tel & Tel Limited, MTS NetCom Inc., The New Brunswick Telephone Company, Limited, NewTel Communications Inc., and TELUS Communications Inc., and Vidéotron Télécom ltée, relating to, among other matters, the appropriate definition for an eligible residential Network Access Service (NAS), as well as the issues raised by Stentor in its letter of 25 July 1997. In their comments to the Commission, parties also addressed the question as to whether competitive local exchange carriers (CLECs) must become CLECs in all areas in which they offer service.
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1. In Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8), the Commission determined that all local exchange carriers (LECs) would receive contribution revenues from the central fund on a pro rata basis according to the number of residential NAS served by the LECs in each band and the subsidy requirement associated with the band. The Commission stated that residential NAS shall be defined in terms equivalent to those in the incumbent local exchange carriers' (ILECs) tariffs. A dispute arose in the CRTC Interconnection Steering Committee (CISC) Central Fund Sub-Working Group as to the definition of residential NAS that should be used to determine eligibility to receive contribution.
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2. In its comments, Stentor indicated that most parties agreed that certain elements were necessarily part of eligible residential NAS. Stentor submitted that the only point of contention concerning eligible residential NAS was whether or not it included unlimited flat rate service. Both Stentor and CAC/FNACQ/NAPO contended that eligible residential NAS included unlimited flat-rate service. Stentor argued that in Definition of Business and Residence Service for Stentor Member Companies, Telecom Public Notice CRTC 97-30, 7 August 1997, the Commission reinforced the principle that the portable subsidy mechanism is to be made available to basic residential service, and in Local Service Pricing Options, Telecom Decision CRTC 96-10, 15 November 1996 (Decision 96-10), the Commission rejected the ILECs' non-flat rated local service pricing options on the ground, among others, that they did not provide essential elements of basic telephone service, such as flat rate local calling.
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3. CAC/FNACQ/NAPO relied on an Order of the U.S. Federal Communications Commission which concluded that consumers might not receive the benefits of universal service unless a minimum amount of local usage was included within the supported services. For CAC/FNACQ/NAPO, this meant that, in the Canadian context, the subsidy was only available to providers offering unlimited flat rate local calling. In CAC/FNACQ/NAPO's view, the purpose of the contribution fund (the Fund) was to ensure that the price of basic residential local service in high cost areas continued to be affordable in the same fashion as it is presently provided.
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4. Most other parties agreed that eligible residential NAS had to provide switched two-way voice communications and that the method of pricing was irrelevant. They argued that Stentor's narrower definition would restrict access to the Fund and impede competitive entry in the local market. They submitted that, in Decision 97-8, the Commission forbore from regulating CLECs' retail services in order to provide CLECs with maximum service and pricing flexibility and to permit them to realize the benefits of competition in terms of price, innovation, and services offered.
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5. Stentor also submitted that CLECs, particularly wireless service providers, had to become CLECs in all exchanges where they provided services. Otherwise, their customers roaming in multiple exchanges might be denied access to 911, Message Relay Service (MRS) or their toll carrier of choice. Stentor also maintained that competitive neutrality required that wireless carriers become CLECs in all exchanges where they provide service in order to interconnect with other LECs, as was required from wireline CLECs. Finally, Stentor submitted that wireless carriers electing to become CLECs in high cost areas only, could draw a disproportionate share of subsidy from the Fund while avoiding payment into the Fund for toll
traffic routed through their networks in low cost areas.
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6. In their comments, parties representing potential CLECs rejected Stentor's contentions, arguing that requiring carriers to become CLECs in all exchanges where they provide service would undermine the Commission's objective of promoting competition and would place an undue financial burden on some carriers. They also maintained that this interpretation would be contrary to the Decision 97-8 objective to provide carriers the liberty to operate as CLECs on an exchange by exchange basis. In response to Stentor's contention regarding the ability of customers to access 911, MRS and their choice of toll provider, Cantel also pointed out that it already provided 911 and MRS. It also indicated that it would be able to provide equal access to the same extent as any wireline carrier.
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7. With regard to the position of Stentor and CAC/FNACQ/NAPO that eligible residential NAS must be flat rated, the Commission notes that it made no determination, in Decision 96-10, as to whether residential local service must be flat rated; rather, the Commission examined how best to provide affordable residential local service to low income customers. The Commission concluded that a targeted subsidy program would be the most appropriate way to address affordability issues and rejected the specific proposals made by the ILECs.
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8. The Commission notes that in deciding to forbear from exercising its powers to approve the rates for retail services offered by CLECs, it found that such services will be subject to competition sufficient to protect the interests of users. The Commission finds that requiring CLECs to offer flat rate service to be eligible to receive contribution would be inconsistent with the Commission's determination in Decision 97-8. Moreover, insofar as such a requirement would primarily affect the manner in which wireless CLECs currently price their services, the Commission finds that basing a definition of residential NAS on a flat rated pricing approach would be inconsistent with the intention of the Commission expressed in Decision 97-8 to establish a framework for local exchange competition that is neutral in terms of technology. The Commission notes that since a CLEC, by definition, must comply with the conditions set out in Decision 97-8 relating to, for example, the provision of 911 service, it follows that any residential NAS in respect of which a CLEC is eligible to receive contribution will necessarily comply with Decision 97-8.
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9. Stentor also submitted that carriers, and in particular wireless service providers, that elect to become CLECs, must do so in all exchanges where they operate. In the Commission's view, such an obligation would be inconsistent with the Commission's determination, in Decision 97-8, to permit CLECs to define their own local serving areas. In the Commission's view, Stentor's proposal would not further the Commission's objective of increased competition in the local exchange service market.
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10. The Commission also considers that CLECs, including wireless CLECs, need only provide 911, MRS and equal access in the serving area or areas where they operate as a CLEC. Stentor's contention that customers of wireless CLECs should have access to these services wherever they roam, would impose a far greater obligation on wireless CLECs than on wireline CLECs, and would effectively prevent wireless providers from selecting their own CLEC serving areas. The Commission therefore finds that the imposition of such additional obligations on wireless CLECs would not be consistent with the intention of the Commission to establish a framework that is neutral in terms of technology.
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11. In light of the foregoing, the Commission orders that:
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a) residential NAS, in respect of which a LEC is eligible to receive contribution, be defined as the NAS used by the LEC to offer residential switched two-way local voice services in the exchanges within which it operates as a LEC; and
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b) carriers are not required to operate as CLECs in all exchanges where they operate.
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Laura M. Talbot-Allan
Secretary General
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This document is available in alternative format upon request.
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